Rising insurance costs could turn the dream of buying a coastal bach into a nightmare.
The Insurance Council today released a report warning that spiralling insurance costs could out-price such properties if no action is taken to have a more centralised, better response to planning for the impact of natural hazards.
"High risk" properties - such as coastal baches - could incur higher premiums as insurers reassess their appetite for taking on risk and either increase excesses on policies or put up premiums.
"New Zealand's population is located in coastal areas and beside rivers," the report says. "As more people live in our largest cities, more lives and assets concentrate in disaster-prone areas. By 2050 about one million older New Zealanders will be living in areas vulnerable to severe flooding, coastal storm surges, land slips and wind storms. Often, developed cities suffer from under-investment and poor maintenance of infrastructure while the interdependence of digital infrastructure increases vulnerability.
These conditions can put cities close to a tipping-point of disaster from hazard events."
The document warns about the risks of buying some "high-risk" properties because insurance premiums could either increase or cover be withdrawn if hazard issues are not addressed.
Seaside baches are in that high-risk category and the report, Protecting New Zealand from Natural Hazards, will be released at the council's national annual conference in Auckland today.
It criticised natural hazard research, preparation management and co-ordination. The insurance industry wants insurance to be kept affordable but the report cited "high-risk areas" and referred particularly to flood-prone areas of Christchurch where excesses of up to $10,000 applied to each property, indicating the risks associated with owning such places.
"The message that over time those in high-risk areas will face higher premiums or withdrawal of cover needs to be maintained," the report said.
It also criticised the fact that no one state agency was responsible for co-ordinating a national response to natural hazard management, recommending the Department of the Prime Minister and Cabinet take the lead and saying responsibility needed to rest at the highest level of government.
Sarah Stuart-Black, Ministry of Civil Defence Emergency Management acting director, welcomed the report.
Read the report here:
"The ministry is already engaging with other government agencies on discussions around hazard risk reduction. The Insurance Council report provides one of many constructive inputs into those discussions," she said.
Kelvin Berryman, director of the Government-funded Natural Hazards Research Platform, which is dedicated to increasing our resilience against natural hazards, backed the paper's conclusions, saying he would only buy a coastal bach "rather carefully" and warned people to consider tsunamis, coastal erosion and rising sea levels.
How far a bach was from a beach, its height above sea level and speed of coastal erosion were factors buyers must consider, he said.
"People buy without thinking of these things," Dr Berryman said, citing lack of natural hazard co-ordination among state agencies and saying responsibility was spread across the Ministry of Civil Defence and Emergency Management, Ministry for the Environment and Ministry of Business, Innovation and Employment.
"Yet in Australia, it's the Attorney-General's Department and in the UK, it's the equivalent of the Department of the Prime Minister and Cabinet."
Natural hazard plan
What the Insurance Council wants:
• Put PM's Department in charge
• Identify gaps at local government level
• Emphasise risk reduction
• Review/align legislation
Source: Insurance Council of NZ